Bad Samaritan 요약1

[Statesman]

Ha-Joon Chang is a Cambridge economist who specializes in the poverty of the Third World and its people, groups, nations, and empires, and their doctrines that are responsible for this condition. He won the Gunnar Myrdal Prize for his book “Kicking Away the Ladder” (2002), and he shared the 2005 Wassily Leontief Prize for his contributions to “Rethinking Development in the 21st Century.”  

His book is a well-written account of what he calls the “Bad Samaritans,” “people in the rich countries who preach free markets and free trade to the poor countries in order to capture larger shares of the latter’s markets and preempt the emergence of possible competitors. They are saying ‘do as we say, not as we did’ and act as Bad Samaritans, taking advantage of others who are in trouble.” “Bad Samaritans” is intended for a literate audience of generalists and many of Chang’s examples are taken from his own experiences as a South Korean born in 1963.

 Ha-Joon Chang writes a strong narrative about the ills of the capitalist world.  It is a combination of anecdotal history and comparative history that uses many good statistical elements to support his common sense arguments.  Most chapters begin with an interesting anecdotal tale that illustrates the theme of that chapter, and all chapters end with an effective summary of his arguments.  His title is most appropriate as he readily supports his position that free trade is a myth, and a realistic presentation of the history of capitalism demonstrates the reality behind the myth.

 Chang argues that unregulated international trade (free markets) has very rarely succeeded in producing economic development, and has a far worse record compared to interventionist policies. He cites evidence that GDP growth in developing countries was higher prior to external pressures recommending deregulation and extends his analysis of the failures of free trade to induce growth through privatisation and anti-inflationary policies.

The fundamental myth of the Thomas Friedman neoliberal cons is that in a "flat world" everybody is not only able to compete with everybody else freely, but should be required to compete with .

There are two obvious flaws in the so-called "free trade" theories made by neoliberal philosophers like Thomas Friedman.

First, "infant" economies - countries that are only beginning to get on their feet - cannot "compete" with "mature" economies. They really only have two choices - lose to their more mature competitors and stand on the hungry and cold outside of the world of trade, or be colonized and exploited by the dominant corporate forces within the mature economies

Second, the way "infant" economies become "mature" economies is not via free trade. It never has been and never will be. Whether it be the mature economies of Britain , America , Japan , or Brazil, in every single case, worldwide, without exception, the economic strength and maturity of a nation came about as a result not of governments "standing aside" or "getting out of the way" but instead of direct government participation in and protection of the "infant" industries and economy.

The way economies go from being underdeveloped and uncompetitive to becoming developed, strong, and aggressively competitive is simple and straightforward: government steps in.

Government first determines which industries are worth growing and which are not. 

The people referred to in the title of  "Bad Samaritans: The Myth of Free Trade and the Secret History of Capitalism," are advisers from rich nations who tell poor countries to embrace free-trade policies that rich nations themselves never practiced. Quoting a 19th century German economist on the British, Chang writes that today's rich nations are effectively "kicking away the ladder ... in order to deprive others of the means of climbing up" after them. But the history of capitalism has been so thoroughly rewritten, Chang says, that most of these "Bad Samaritans do not even realize that they are hurting the developing countries with their policies."

 New York Times columnist Thomas Friedman comes in for prime attention from Chang.  In the book ,"The Lexus and the Olive Tree," Friedman wrote that he concluded that these countries will need to fit themselves into the "Golden Straitjacket," a privatization, free trade and free market. 

"The truth is that the free movement of goods, people, and money that developed under British hegemony between 1870 and 1913 - the first episode of globalization - was made possible, in large part, by military might, rather than market forces." And this period of imperial free trade followed long years of high tariffs and careful protection and nurturing of selected British industries, including the banning of superior textile import!s from India, blocking the Irish wool industry from exporting to foreign nations, and prohibiting the American iron industry from competing with the mother country. 

One American who was having none of that, Chang points out, was Alexander Hamilton, who became the country's first treasury secretary and implemented an array of policies to protect the country's "infant industries" : "protective tariffs and import! bans; subsidies; export ban on key raw materials; import! liberalization of and tariff rebates on industrial inputs; prizes and patents for inventions; regulation of product standards; and development of financial and transportation infrastructures."

As Chang writes, "Were he the finance minister of a developing country today, the IMF [International Monetary Fund] and the World Bank would certainly have refused to lend money to his country and would be lobbying for his removal from office."  the U.S. enacted tariffs that remained the highest in the world until World War I.

"[M]arket and democracy clash at the fundamental level," Chang writes. "Democracy runs on the principle of 'one man (one person), one vote.' The market runs on the principle of 'one dollar, one vote.' " Chang's point may seem obvious, yet it is one infrequently made, due to the power of wealthy individuals and nations. But just as obvious is Chang's conclusion that if developing countries "want to leave poverty behind" and nurture their industries just as today's rich nations once did, "they have to defy the market."

The main underlying position that demolishes the myth of capitalist free trade and its supposed successes with globalization is that all the current wealthy countries achieved their wealth not through free trade, but through the use of highly protective tariffs and effective use of subsidies and laws that regulated foreign business within their own country.  

 “The Korean miracle was the result of a clever and pragmatic mixture of market incentives and state direction.”    

 Both Britain and the U.S. had the highest tariff protection of all countries ever

From these leading examples and conclusions it is easy to further the argument that free trade is not working because it forces developing countries to eliminate the very same protective barriers that the rich countries used to gain their wealth.    Rather than free trade, the argument turns to support the idea of using protective tariffs and subsidies in areas where undeveloped countries need them, in order to grow their economies as the rich countries initially did.

Chang concludes that restricting regulations of foreign investment “is likely to hinder, rather than help, their economic development.”

 In the 1980s, as developing countries across the world struggled with crushing debt burdens and slow-growing economies, they were pushed—by the United States and international financial institutions—to embrace a set of policies that promised to rescue them. These policies, which are often grouped under the label neoliberalism, proceeded from the assumption that developing countries interfered too much with the workings of their markets. Instead, countries needed to lower tariffs and embrace free trade, privatize state-owned industries, end subsidies to businesses and consumers, balance their budgets, and be friendlier to foreign investment. If a country got its financial house in order and let the free market work its magic, in other words, it had a good chance of watching its economy boom.

But neoliberalism turned out not to be the  cure-all  its advocates promised. Even as developing countries opened up their markets, sold off assets, and cut back on spending, their economies for the most part stagnated. In fact, over the past twenty-five years, growth rates in most of the developing world have been lower than they were during the 1960s and ’70s, when state interventionism was in economic vogue. And while there have been some massive success stories in recent decades—most obviously China and India—the gap in wealth between the developed world and most developing countries has actually widened. Plenty of explanations have been given for neoliberalism’s failure, including the persistence of corruption, the import!ance of culture, and the simple failure on the part of many countries to follow the neoliberal agenda completely. But in his new book, Bad Samaritans, the Cambridge economist Ha-Joon Chang offers a solution to the puzzle: Neoliberalism didn’t work because the advice it gave made no sense. Chang argues, neoliberals ignored the “secret history of capitalism”: If developing countries’ embrace of the free market has failed to deliver what it promised, it’s because “free markets are not good at promoting economic development.”

This is, a conclusion that most economists would find less than credible. But Chang sets out to prove it not theoretically but empirically, by retelling the history of economic development. As he sees it, the dominant economic powers of the past two centuries—Great Britain and the United States—succeeded not because they let the free market reign but because they didn’t. The US, from the days of Alexander Hamilton, used tariffs to protect “infant industries”—by keeping prices on import!s high, the tariffs made domestic products more attractive, giving domestic producers a chance to develop. Great Britain, meanwhile, did adopt a policy of almost unrestricted trade in the mid-nineteenth century, but Chang argues that it did so only after using tight restrictions on import!s to become the world’s leading industrial power.

In the twentieth century,most of the great economic success stories—including Japan and the so-called Asian Tigers, like Taiwan and South Korea—limited import!s and foreign investment, subsidized new industries to get them off the ground, and generally violated most of the rules of neoliberalism. Yet their economies grew at enormously fast paces, turning them in just a couple of a generations from underdeveloped backwaters into prosperous, bourgeois societies. Even those countries that have failed to make much headway against poverty, including most of Latin America and Africa, generally grew faster when their governments took active roles in restricting and guiding the market.  And those rich countries that insist poorer ones follow neoliberal prescriptions are hypocrites, insisting on solutions they themselves did not follow.

Chang isn’t advocating socialism, exactly—although he does offer up a long defense of state owner­ship of enterprises. What he’s pushing instead are aggressive government policies designed to protect and nurture domestic manufacturers, allowing countries to ascend the technological ladder so that they can eventually compete with wealthier nations. Chang believes that private investors are impatient and unwilling to sacrifice present returns for future gains. As a result, they will not take risks on new industries in poor countries, at least not in the absence of some other advantage (like tariff protection or government subsidy). If governments create protective umbrellas—via tariffs, subsidies, loose intellectual-property rules, restrictions on import!s, and the like—for domestic companies, though, those companies will have a chance over time to become globally competitive, raising the level of prosperity of the country as a whole. Chang acknowledges that these umbrellas have costs—they raise prices for consumers in developing countries and often cut off access to better and cheaper foreign goods—but those are outweighed by the future benefits.

Chang is certainly right that governments have an import!ant role to play in fostering economic development.  

 Ha-Joon Chang’s life is conterminous with his country’s advance from being one of the poorest on Earth—with a 1961 yearly income of $82 per person, less than half the $179 per capital income in Ghana at that time—to the manufacturing powerhouse of today, with a 2004 per capita income of $13,980. South Korea did not get there by following the advice of the Bad Samaritans. Chang’s prologue contains a wonderful account of how post-Korean War trade restrictions and governmental supervision fostered such projects as POSCO (Pohang Iron and Steel Co.), which began life as a state-owned enterprise that was refused support from the World Bank in a country without any iron ore or coking coal and with a prohibition on trade with China. Now privatized, POSCO is the world’s third largest steel company. This was also the period in which Samsung subsidized its infant electronics subsidiaries for over a decade with money made in textiles and sugar refining. Today Samsung dominates flat-panel TVs and cell phones in much of East Asia and the world.

In Chang’s conception, there are two kinds of Bad Samaritans. There are the genuine, powerful “ladder-kickers” working in the “unholy trinity” of the International Monetary Fund (IMF), the World Bank, and the World Trade Organization (WTO). Then there are the “ideologues—those who believe in Bad Samaritan policies because they think those policies are ‘right'.” Both groups adhere to a doctrine they call “neoliberalism.” It became the dominant economic model of the English-speaking world in the 1970s and prevails at the present time.

Thomas Friedman calls this complex of policies the “Golden Straitjacket,” the wearing of which, no matter how uncomfortable, is allegedly the only route to economic success.  The Golden Straitjacket is what the unholy trinity tries to force on poor countries. It is the doctrinal orthodoxy taught in all mainstream academic economics departments and for which numerous Nobel prizes in economics have been awarded.

His basic conclusion: “Practically all of today’s developed countries, including Britain and the US, the supposed homes of the free market and free trade, have become rich on the basis of policy recipes that go against neo-liberal economics.” All of today’s rich countries used protection and subsidies to encourage their manufacturing industries, and they discriminated powerfully against foreign investors. 

 Once "strategic" and "import!ant" industries are identified, government both encourages and protects their domestic growth in a variety of ways. These include subsidies, legal protections (like patent laws), import! tariffs to protect against foreign competition, strong industry regulation to ensure quality, and development of infrastructure to ease manufacture, distribution, sales, and use of the product.

In fact, the success of the Lexus (and the Prius and every other Toyota) is entirely traceable to massive government intervention in the markets by Japan over a fifty-year period that continues to this very day.

To illustrate how infant industries must be nurtured by government until they're ready to compete in global marketplaces,

Chang points to the example of his own son, Jin-Gyu. At the age of six, the young boy is legally able to work and produce an income in many countries of the world. He's an "asset" that could be "producing income" right now. But Chang, being a good parent, intends to deny his son the short-term "opportunity" to learn a skill like street-sweeping or picking pockets or shining shoes (typical "trades" for six year olds in many countries) so he may grow up instead to become an engineer or physician.

"Yet this absurd line of argument is in essence how free-trade economists justify rapid, large-scale trade liberalization in developing countries. They claim that developing country producers need to be exposed to as much competition as possible right now, so that they have the incentive to raise their productivity in order to survive. Protection, by contrast, only creates bad effects.  The earlier the exposure, the argument goes, the better it is for economic development."

But history proves the free-traders wrong. Every time, without exception, a developing nation is forced (usually by the IMF, WTO, and/or World Bank) to unilaterally throw open all their doors to "free trade," the result is a disaster. Local industries, still in their developmental stages, are either wiped out or bought out and shut down by foreign capital. Wages collapse. The "Middle Class" becomes the working poor. And in the process the largest corporations and wealthiest individuals in the world become larger, stronger, and more wealthy.

Even worse, opening a country up to "free trade" weakens its democratic institutions. The role of government is diminished - and in a democratic republic "government" is another word for "the will of the people"  

Looking more specifically at private versus public enterprise, and again journeying around the world via Singapore, Korea, Taiwan, China, Europe, South America, a strong case is made for public enterprise and highlights some of the “pitfalls of privatization.”  In sum, “State-owned enterprises are often more practical solutions than a system of subsidies and regulations for private-sector providers…[and]…may be superior to private sector firms.”

The next focus is on intellectual ‘rights’, the idea of borrowing ideas.  Once again, historical examples show that the rich countries previously copied much information and technological information while denying protection to foreign ideas in order to create their own wealth.  Simply put, if the neoliberals truly believed in promoting development they would make it easier to acquire the information needed to do so rather than prevent its acquisition.

Democracy’s relationship with economic prosperity takes a strong hit, with a discussion of corruption and its various forms (bribery, employment, voting).  Chang, using examples from America to Zaire, effectively argues against the neoliberal excuse that poor countries are poor because of corruption, citing several examples to show the converse, that “economic development does not automatically reduce corruption”.   He extends the argument into democracy, saying that the “market runs on the principle of one dollar, one vote,” rather than the democratic one man, one vote.  He concludes that democracy and markets, rather than being inseparable as argued by the neoliberals, actually “clash at a fundamental level.”  As he has already demonstrated by this time that free markets “are not good at promoting economic development” by extension there is no “virtuous circle linking democracy, the free market and economic development.”  

In fact, “The Bad Samaritans have recommended policies that actively seek to undermine democracy in developing countries,” with a fact  that “it is unlikely democracy will promote economic development through promoting the free market.”  In other words, given a democratic choice, the people of the world would choose something other than the ‘free market’ as envisioned and dictated by the wealthy neoliberal supporters of the world.   Chang provides two strong examples of re-directing government spending away from military spending to education, health, or infrastructure development, or promoting economic growth through creating a welfare state (which supports working mothers, children, education, hospitals, retirement and all those other nasty socialist ideas that the people of the world want but the neoliberals say hinder development).  It all depends on your definition of development – more GDP for the transnational corporations, or more security and safety for the general populace. 

Chang’s final conclusion is that if the neoliberals truly believed in creating economic wealth and development within the developing world, it would be in their best interest to “accept those ‘heretical(different)’ policies.”  Chang holds out hope for changing the minds of neoliberals.

Are some cultures incapable of economic development?

Does culture influence economic development?

What is a culture?

Changing culture

: Culture can be changed deliberately through persuasion. This is a point rightly emphasized by those culturalists who are not fatalists.

The examples show that ideological persuasion is important but not enough in changing culture. It has to be accompanied by changes in policies and institutions that can sustain the desired forms of behaviour over an extended period of time so that they turn into 'cultural' traits.

Reinveinting culture

We needed to understand the role of culture in economic developement in its true complexity and inportance. Culture is complex and difficult to define. It does affect economic development, but economic development affects it more than the other way around. Culture can be moved. It can be changed through a mutually reinforcing interaction with economic development; ideological persuasion; and complementary policies and institutions that encourage certain forms of behaviour, which over time turn into cultrual traits. Only then can we free our imaginations both from the unwarranted pessimism of those who believe culture is destiny and from the naive optimism of those who believe they can persuade people to think differently and bring about economic development that way.